Illinois may be heading for recession, think tank reports

In areportpublished on its website Jan. 17, the organization claims that “hitting residents and
businesses when they’re struggling risks sending a faltering economy into a
tailspin.”

According to the report, the Illinois Senate’s budget plan,
which is being spearheaded by Senate President John Cullerton and Senate Minority
Leader Christine Radogno, would raise taxes an additional $5 billion dollars;
includes $7 billion dollars in borrowing; and a $200 million dollar bailout of
CPS. This comes at a difficult time for
the state where residents face the highest tax burden in the nation.

Projections for Illinois are similarly bleak. The
December 2016 monthly briefing
from the Commission on Government Forecasting and Accountability (COGFA) included
some dismal numbers, including lower corporate tax collections, lower personal
tax revenue and lackluster performance of sales tax.

In summary, the COGFA
report noted that the state’s economy was not performing as well as economists
and residents would like.

“To summarize, to date the state has
experienced across-the-board revenue weakness,” according to the report.

The numbers speak for themselves: COGFA reported that corporate
income tax revenue for the first six months of fiscal year 2017 is down $386
million compared to the same period in fiscal year 2016. Sales tax collections
are up, but only by $45 million -- which doesn’t come close to making up the
difference.

Income taxes paid by individuals are also off by $189 million, and
state revenues are down 5 percent year to date. According to Illinois
Policy, taking into account all state revenues, the numbers are still down
nearly 7 percent year to date.

The Illinois Policy report blamed excessive regulations, a
pension crisis and the nation’s highest property taxes as the main reasons for
the economic hardship. It also noted the business owner’s tax burden is larger
than in other business climates, which -- when coupled with workers’ compensation
costs and a loss of manufacturing jobs -- serves to further damage the states
fiduciary well-being.

Illinois Policy has put forward several ideas about what exactly
the current budget proposal would mean for the state, and why, in essence, a
move to raise taxes could be disastrous.
According to Illinois Policy, the proposed budget only provides for the
short-term revenue needs of the state, and will lead to economic and population
losses in the long term.

One concern for the group is out-migration. It reported
that the state has already lost more than 1.2 million residents since 2000,
which has cost Illinois a hefty $40 billion in taxable income. The suggestion
here is that tax hikes will accelerate the rate at which people leave the
state, thus creating an even bigger tax revenue problem.

Illinois Policy has
already reported that Illinois residents are subject to one of the highest tax
burdens in the nation, along with higher property taxes than anyone else.

Moreover, the group reported, the state is failing to create
new jobs and is losing the manufacturing base that for years has provided for
the state economy. The fear is that a raise in taxes without a concentrated
reform effort will leave little enticement for companies to remain in Illinois.

Finally, Illinois Policy warned that the plan's "quick fix" of higher
tax revenues will inhibit important reforms that the state
needs to remain viable. The group named property tax, retirement plans, workers’
compensation, Medicaid and collective bargaining as areas in need of desperate
reform.

Illinois Policy is an independent organization that
describes itself as “generating public policy solutions aimed at promoting
personal freedom and prosperity in Illinois.”

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